Does Waddell & Reed Financial, Inc. (NYSE:WDR) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Waddell & Reed Financial, Inc. (NYSE:WDR) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds' portfolios at the end of the second quarter of 2019. At the end of this article we will also compare WDR to other stocks including Safehold Inc. (NYSE:SAFE), Corcept Therapeutics Incorporated (NASDAQ:CORT), and Trupanion Inc (NASDAQ:TRUP) to get a better sense of its popularity. Our calculations also showed that WDR isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the key hedge fund action encompassing Waddell & Reed Financial, Inc. (NYSE:WDR).
What does smart money think about Waddell & Reed Financial, Inc. (NYSE:WDR)?
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WDR over the last 16 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Waddell & Reed Financial, Inc. (NYSE:WDR) was held by Fisher Asset Management, which reported holding $29.1 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $28.6 million position. Other investors bullish on the company included GAMCO Investors, Citadel Investment Group, and Renaissance Technologies.
Because Waddell & Reed Financial, Inc. (NYSE:WDR) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of fund managers who were dropping their full holdings last quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management dumped the biggest stake of the 750 funds tracked by Insider Monkey, valued at about $6 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund cut about $1.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Waddell & Reed Financial, Inc. (NYSE:WDR) but similarly valued. We will take a look at Safehold Inc. (NYSE:SAFE), Corcept Therapeutics Incorporated (NASDAQ:CORT), Trupanion Inc (NASDAQ:TRUP), and 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS). This group of stocks' market valuations are similar to WDR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAFE,3,3970,2 CORT,17,123655,-1 TRUP,10,163287,-3 FLWS,21,85775,2 Average,12.75,94172,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $128 million in WDR's case. 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 3 bullish hedge fund positions. Waddell & Reed Financial, Inc. (NYSE:WDR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on WDR, though not to the same extent, as the stock returned 4.6% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.